Market Sentiment

About a month ago, I got caught in a BIDU short. BIDU had been paying off for me, including a short I entered as soon as I landed in Albuquerque and covered for +20 points by the time we got to the rental car office. But this time, BIDU gapped up and kept running all morning. Luckily I had the sense to cover instead of trying to gut it out. It became obvious that this wasn’t just a short pop.

Well, since then, BIDU’s run about another 120 points. GOOG also had a huge day later after its earnings — I think it went up like 77 that day? AAPL has run from a base of about 130 to near 180. Some stocks like Research in Motion and First Solar were barely dented by the credit uncertainty.

So what’s going on? Well, I agree with Warren Buffett’s assessment, that the Fed staved off a further crisis by bailing out Bear Stearns. That was enough for the market to find confidence again. As bearish as I was, when I saw the tech stocks change their sentiment (the opposite of the feeling I had in October when I sold everything I had), I suspected that the market had priced in a bottom.

So far the market’s been doing quite well as it recovers from the crisis and begins to realize that a low interest rate environment is pretty damn good for growth. The food and energy inflation concerns have never really hurt the market, in my opinion, although they’ve probably hurt the more traditional and logistics companies more. The thing is, FedEx and UPS and WalMart spend a good deal of their time hedging against energy costs, and they’ve streamlined to cope. If you look at their charts, FDX and UPS have maintained, while WMT has soared lately.

Buffett said that the market will be fine, but that individuals will suffer. That about sums it up. Bush and Congress have done absolutely nothing to help the poor people affected most directly by the subprime crisis. The people in debt are going to be worse off, as inflation directly affects their well-being. The useless neo-liberals (I can only hope that some adversary can put together a cohesive platform to discredit them as being robber barons) will claim that the jobs issue is just healthy capitalism at work — meanwhile people from all sorts of different sectors are getting laid off because of profiteering managers who end up with fat bonuses.

Stocks look pretty healthy. The market indices are still below their 200-day moving averages, so technically one would say we’re still bearish. But I think for now, the worst is over. The big picture looking forward is that the entire world is opening up to globalization and business is becoming even more dynamic, productive, and efficient. The US is already losing its edge, thanks to Bush’s yokel steering, but in general there’s a lot of international growth to be had and I think this will be reflected in stocks. I am a believer in the theory that there will be some risk as this “stimulus check” wears off and the US economy has to fend for itself for a bit.

All that said, I am still cash in my retirement funds… I am waiting for a pullback. I do own Nintendo, although it’s been a little stuck below where I sold it back in October. I would’ve been better buying AAPL or GOOG.